Tesla Might Consider Partnering With Franchised Dealers

Steve Lynch
by Steve Lynch

Tesla Motors CEO Elon Musk told the press last week that he is open to the idea of expanding their U.S. dealer network to include franchised dealerships. This would be a sea change for the factory direct-to-consumer company but we are not surprised. A few weeks ago, I predicted that Tesla would hook up with traditional dealers sometime in 2015. Back in 2013, my alter ego, Virgil Hilts, proposed that Telsa head in that direction sooner rather than later.

Now that it actually might happen, here is how we think Musk should put it together.

During the same speech he noted that his company’s 2020 worldwide sales goal is 500,000 units, which presumably means 150,000 to 200,000 in the United States, well up from 2014’s estimated sales number of 15,000. Between other automakers starting to catch up to Tesla’s technology and such ambitious objectives, Musk must know that the time has come to set up an efficient dealer network.

Musk emphasized they would implement this plan only with dealers who could provide customers with a “really good experience.” In a shot at stores who are lobbying to keep in place existing franchise laws prohibiting direct sales, Tesla said about their possible dealer selection process, “If you’re a jerk to us, we’re not going to turn around and try to do a partnership later.” I think the dealers fighting against Musk know that direct sales will never happen by any volume automaker; they are just unhappy that they cannot get a Tesla franchise.

As an aside, give the auto dealer lobby in Connecticut the award for the Dumbest Reasons To Block Tesla Direct Sales: per the Hartford Courant, they claimed that if Tesla opened outlets in the state and subsequently suffered a recall they would be hesitant to tell the public about it. I hardly think that PR-savvy Mr. Musk, or any automaker in today’s recall-sensitive environment, would be so stupid. They also cited all the poor Yugo owners in the 1980s who got left “holding the bag” when the Yugoslav direct-sale automaker when out of business in the U.S.

Musk’s comment seems to indicate that he may reach out to retailers individually regardless of the brand they currently sell. That would be the wrong tactic. Once a chosen dealer’s manufacturer caught wind of their dealer “dualing” with Tesla there would be hell to pay. An automaker may not have legal ground to stop the move, but they might say: how about a load of eight Marrakesh Brown X6’s Mr. BMW Dealer, that’s all we have this week, sorry.

Neither would it be a wise idea to partner with one of the public-held dealership groups, such as AutoNation, Sonic or Lithia. Those bureaucratic organizations value their own brand name over those of the automakers’ and would subject their Tesla dealerships to monthly meetings wanting to know why they are not generating as much F&I or parts income as their Chevy or Dodge stores.

The answer is to set up an arrangement to distribute their cars through one dealer network. So which brand has well-heeled customers, a track record of excellent CSI, attractive, primarily exclusive facilities, a need for additional traffic to survive themselves, has the optimum number of outlets (275), and thus would be the best partner for Tesla? That would be Acura. If each Acura outlet sells 40 Teslas per month, that is an additional 130,000 sales annually for Tesla plus the huge jump in traffic would cause Acura sales to soar. (Spare me the comparisons to Studebaker dealers selling Mercedes-Benz cars back in the 1950’s, please.)

No matter which sales channel Musk chooses, it will be fun to watch reality set in. Once Tesla vehicles become readily available, their price-fixing days will be over. Musk will be amazed how the customers that had no problem allowing Tesla to make a 25% markup on their cars will be replaced by those who think dealers should be shot if they try to make 1% over invoice. Welcome to the real car world, Mr. Musk.

Steve Lynch
Steve Lynch

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  • Mrcool1122 Mrcool1122 on Jan 21, 2015

    Buying the car direct from Tesla was the best experience I've ever had buying a car. If they start going to dealers, and I wanted to upgrade, I would rather deal with the company directly. I already know what I want; car dealers are pitchmen who try to push the more expensive model and having to listen to that is a downer.

  • CarnotCycle CarnotCycle on Jan 21, 2015

    Elon Musk made out like a bandit picking through GM detritus getting NUMMI on the cheap, but he missed out on Saturn's excellent dealer network. They were consistent, customer-focused, retail-type shops that engendered brand loyalty from the purchase/service experiences alone. And Elon could have picked it all up for a song in 2009.

    • See 2 previous
    • Pch101 Pch101 on Jan 21, 2015

      @SpinnyD Toyota essentially paid Tesla to take the Fremont plant. Without the Toyota/Fremont package, Tesla could have failed completely, but the deal allowed Tesla to access its federal funding.

  • TheMrFreeze That new Ferrari looks nice but other than that, nothing.And VW having to put an air-cooled Beetle in its display to try and make the ID.Buzz look cool makes this classic VW owner sad 😢
  • Wolfwagen Is it me or have auto shows just turned to meh? To me, there isn't much excitement anymore. it's like we have hit a second malaise era. Every new vehicle is some cookie-cutter CUV. No cutting-edge designs. No talk of any great powertrains, or technological achievements. It's sort of expected with the push to EVs but there is no news on that front either. No new battery tech, no new charging tech. Nothing.
  • CanadaCraig You can just imagine how quickly the tires are going to wear out on a 5,800 lbs AWD 2024 Dodge Charger.
  • Luke42 I tried FSD for a month in December 2022 on my Model Y and wasn’t impressed.The building-blocks were amazing but sum of the all of those amazing parts was about as useful as Honda Sensing in terms of reducing the driver’s workload.I have a list of fixes I need to see in Autopilot before I blow another $200 renting FSD. But I will try it for free for a month.I would love it if FSD v12 lived up to the hype and my mind were changed. But I have no reason to believe I might be wrong at this point, based on the reviews I’ve read so far. [shrug]. I’m sure I’ll have more to say about it once I get to test it.
  • FormerFF We bought three new and one used car last year, so we won't be visiting any showrooms this year unless a meteor hits one of them. Sorry to hear that Mini has terminated the manual transmission, a Mini could be a fun car to drive with a stick.It appears that 2025 is going to see a significant decrease in the number of models that can be had with a stick. The used car we bought is a Mk 7 GTI with a six speed manual, and my younger daughter and I are enjoying it quite a lot. We'll be hanging on to it for many years.
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